Ellen Brown, August 18th, 2010
WEBofDEBT

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she shows how the Federal Reserve and “the money trust” have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.

Scratch this record!!!!! Need help go to MERS!!

Last week Fannie Mae asked treasury for $1.5 billiion in assistance …now comes Freddie with loss and seeks aid.

You know this is outrageous! They applaud MERS and write recommendations of how they are excited with MERS but yet MERS does nothing but conceal information from the borrowers and has secret agreements with the possible beneficiaries of these loans. MERS takes tax dollars away from our schools, children, counties etc.

While we are on this subject of counties and states, why are they crying bankruptcy and major cut backs…how about ending the MERS sham and go after the fees that you cry about with them? Who does this benefit? Not us but the Mortgage Banking Industry and Wall Street so called Lending Institutions.

All these problems came about the same time MERS came to existence…now tell me something? Isn’t this a tad of a coincidence these issues became at the same time sub-prime loans hit peak?

By now we all have witness the Foreclosure Barons you have as designated counsel and what do you plan to do about it? No matter what dots there are, both Fannie and Freddie have a connection?

Why was all this NEVER a REAL PROBLEM in the past with assignments…lets say prior to 1998? Hmmm…

We are no fools.

How the federal housing agencies—and some of the biggest bailed-out banks—are helping shady lawyers make millions by pushing families out of their homes.

— By Andy Kroll

Continue reading…MOTHER JONES

— Illustration: Lou Beach

excerpts:

Chain-of-title is not just an issue for the buyers and sellers of particular homes and title insurance companies. Some entity – and most likely several entities – are claiming these mortgages and loans
as assets when regulators and investors are determining solvency and compliance, but disavowing these same “assets” when acknowledgement of ownership would result in responsibilities ranging from payment of taxes to lawn mowing.

Stern employees often sign as if a bankrupt or out-of-business company or a failed bank owned the mortgage and loan up until foreclosure is imminent. In county recorders’ offices across the state, the Stern-created records show that the trusts acquired mortgages and loans on dates when no such acquisitions ever took place. The trusts claim ownership solely to prove that they have the right to foreclose. The date selected is arbitrary – chosen by Stern or LPS or the mortgage servicing company. In reality, residential mortgage-backed trusts did not rush to acquire billions of dollars in sub-prime non-performing loans in 2008 and 2009 as these assignments falsely state.

Scribd

KABOOM!!! This will send out shock waves.

After last week’s lawsuit filed on behalf of investors for possible securities fraud violations against DJSP Enterprises and another pending. I present to you another Class Action filed 7/26/2010 this time against the Law Offices of David J. Stern P.A., David J. Stern and MERSCORP, Inc..

Mr. Trent totally “gets it” and in this complaint he outlines and points out what we all have a hard time piecing together.

Here are excerpts of the complaint:

Beginning in or about 1999, the Defendant Firm joined with Defendant Merscorp, Inc., and other conspirators in the fraudulent scheme and RICO enterprise herein complained of. The employees of the Defendant Firm, including many licensed attorneys, have become skilled in using the artifice of MERS to sabotage the judicial process to the detriment of borrowers, and, over the past several years, have routinely relied upon MERS to do just that.

As Stern boasted to a room of investors at a recent promotional event, recent “direct source initiatives” by the larger lenders increasingly enable the Defendant Firm, DJSP, and other entities recently formed by Stern to take mortgages “from cradle to the grave.”

The whole purpose of MERS is to allow “servicers” to pretend as if they are someone else: the “owners” of the mortgage, or the real parties in interest. In fact they are not. The standard MERS/Stern complaint contains a lie about this very subject. While the title of the standard complaint makes reference to “lost loan documents,” in the body of the standard complaint, the Defendant Firm alleges that the plaintiff is the “owner and holder” of the note and mortgage. Both cannot be true unless the words used are given new meanings.

With the oversight of Defendant Merscorp and its unknown principals, the MERS artifice and enterprise evolved into an “ultra-fictitious” entity, which can also be understood as a “meta-corporation.” To perpetuate the scheme, MERS was and is used in a way so that to the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments. The conspirators set about to confuse everyone as to who owned what. They created a truly effective smokescreen which has left the public and most of the judiciary operating “in the dark” through the present time.

The preparation, filing, and prosecution of the complaints to “Foreclose Mortgage and to Enforce Lost Loan Documents” were each predicate acts in the pattern of racketeering activity herein complained of, and were actions taken in furtherance of the MERS enterprise. The actions could not have been brought by the Defendant Firm without the MERS artifice and the ability to generate any necessary “assignment” which flowed from it.

By engaging in a pattern of racketeering activity, specifically “mail or wire fraud,” the Defendants subject to this Count participated in a criminal enterprise affecting interstate commerce. In addition to the altered postmarks described below, the mail fraud is the sending of the fraudulent assignments and pleadings to the clerks of court, judges, attorneys, and defendants in foreclosure cases. These Defendants intentionally participated in a scheme to defraud others, including the Plaintiff and the other Class Members, and utilized the U.S. Mail to do so.

These documents were executed by an “Assistant Secretary” or “Vice President,” apparently of MERS. In reality, the person executing the assignments had no knowledge whatsoever of the truth of their contents, and was simply an employee of the Defendant Firm.

Altering common hardware and/or software used by the Defendant Firm so that envelopes used to mail important legal documents, such as final judgments, to defendants contain no date of mailing in the postmark and intentionally delaying in sending the mail until defendants have lost their rights. (Exhibit F). These predicate acts constitute “mail fraud.”

Here is an explanation from David J. Stern of the continuing foreclosure rout:

One of my favorite questions from one of my believers, one of my investors on the first call-in, “What inning are we in? If this was a baseball game, what inning are we in?” And my response is, we’re only in the 2nd inning. We still have 3 innings of foreclosures left, and after the foreclosures, we have 3 innings of REO liquidation and as the REO liquidations pan out, we get into the re-fi and we get into the origination.
[ . . . ]
So yeah, we’re in the 2nd inning, but guess what – when we get to the 9th inning, it’s going to be a doubleheader and we got a second game coming. So when people say, “Oh my God, the economy is bad!” I’m like, “Oh my God, it’s great.” I mean, I hate to hear people are losing their homes and credit isn’t available and credit is such that they can’t re-fi, but if you are in our niche, it’s what we do and it’s what we want to see.

Scribd

Thank you attorney Kenneth Eric Trent P.A. from Ft. Lauderdale , FL !

IN RE Mortgage Electronic Registration Systems (MERS) Litigation.

No. 09-2119-JAT.

United States District Court, D. Arizona.

June 4, 2010.

ORDER

JAMES A. TEILBORG, District Judge.

In the transfer order establishing this consolidated multidistrict litigation (“MDL”), the Judicial Panel on Multidistrict Litigation (“Panel”) stated, “IT IS FURTHER ORDERED that claims unrelated to the formation and/or operation of the MERS system are simultaneously remanded to their respective transferor courts.” (Doc. #1.) The parties contest which claims in each of the various cases relate to the formation and/or operation of MERS.^[1] This Order addresses the thirteen cases^[2] listed below that were transferred by the MDL Conditional Transfer Order (CTO-2) and Simultaneous Separation and Remand of Certain Claims (Doc. #107):

First Plaintiff's Name   Arizona Case Number   Original Jurisdiction Case Number

Huck[3]               CV 10-401-PHX-JAT     3:09-553 (Nevada)
Gillespie                CV 10-413-PHX-JAT     3:09-556 (Nevada)
Duncan                   CV 10-414-PHX-JAT     3:09-632 (Nevada)
Sieben                   CV 10-416-PHX-JAT     3:09-642 (Nevada)
Huck                     CV 10-417-PHX-JAT     3:09-643 (Nevada)
Vo                       CV 10-425-PHX-JAT     3:09-654 (Nevada)
Eastwood                 CV 10-426-PHX-JAT     3:09-656 (Nevada)
Ellifritz                CV 10-427-PHX-JAT     3:09-663 (Nevada)
McConathy                CV 10-428-PHX-JAT     3:09-665 (Nevada)
Smith                    CV 10-429-PHX-JAT     3:09-666 (Nevada)
Sage                     CV 10-456-PHX-JAT     3:09-689 (Nevada)
Mason                    CV 10-457-PHX-JAT     3:09-734 (Nevada)
Freeto                   CV 10-459-PHX-JAT     3:09-754 (Nevada)
Fitzgerald               CV 10-460-PHX-JAT     3:10-1 (Nevada)
Dominguez                CV 10-461-PHX-JAT     3:10-16 (Nevada)

I. General Interpretation of the Transfer Order

In the initial transfer order, the Panel transferred to this Court all allegations within these actions that “the various participants in MERS formed a conspiracy to commit fraud and/or that security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party” or that otherwise concern the “formation and operation” of MERS. (Doc. #1.) However, the Panel simultaneously remanded unrelated claims to their transferor courts, finding that “plaintiffs’ claims relating to loan origination and collection practices do not share sufficient questions of fact with claims regarding the formation and operation” of MERS and their inclusion “would needlessly entangle the litigation in unrelated, fact-intensive issues.” Id.

Accordingly, this Court will not retain claims that, although naming MERS as a defendant, allege conduct primarily related to loan origination and collection practices, or otherwise stray from the common factual core of the MDL. Only causes of action that in essence turn on the formation or operation of MERS, no matter how framed, have been transferred to the undersigned.

Defendants Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc. (collectively, “Moving Defendants”) filed a Motion to Remand Claims. (Doc. #364.) Four responses were filed. Defendant OneWest Bank (“OneWest”) disagrees with Moving Defendants on six claims in one case. (Doc. #420.) Defendants Countrywide Home Loans, Inc., Countrywide Financial Corp., Countrywide Bank, F.S.B., Bank of America Corporation, N.A., ReconTrust Company, N.A., First Horizon Home Loans Corporation, and Wells Fargo Bank (collectively, “Responding Defendants”) disagree as to six types of claims in seven cases. (Doc. #428.) Two other responses were filed that do not dispute the Moving Defendants’ analysis. (Doc. ##415, 416.) MERS replied. (Doc. #433.)

II. Claims on Which the Parties Do Not Agree

Within these “tag-along” actions there are several types of claims over which the parties disagree. Where the parties agree as to the proper determination of a claim, the Court adopts the parties’ determination unless otherwise noted.

A. Fraud in the Inducement

The parties disagree about the status of claims for fraud in the inducement in Duncan (Fourteenth Claim), Sieben (Fourteenth Claim), Huck (Fourteenth Claim), and Ellifritz (Fourteenth Claim). Moving Defendants argue that all of these claims have been transferred to the MDL. Responding Defendants argue that the claims in Duncan, Sieben, and Huck have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court. OneWest argues that the claim in Ellifritz has been remanded in its entirety.

Each of these claims contains the allegation that defendants “failed to disclose the material terms of the loans” and other allegations relating to the loan origination process.^[4] But these claims also allege that defendants failed to disclose that they “had no lawful right to foreclose upon” the properties and that “[the plaintiffs'] obligations on the notes had been discharged.” These allegations relate to the operation of MERS.^[5]

While either the MERS-related misrepresentations or the non-MERS-related misrepresentations could each be logically sufficient to establish liability, it may be that only all of the misrepresentations together were sufficient to induce the plaintiffs to enter the contract. Thus, these claims cannot be split and—as at least some of the allegations relate to the operation and formation of MERS—these claims have been transferred in their entirety to the MDL.

B. Fraud Through Omission

The Parties disagree about the status of claims for fraud through omission in Duncan (Sixth Claim), Sieben (Sixth Claim), Huck (Sixth Claim), and Ellifritz (Sixth Claim). Moving Defendants argue that these claims have been transferred to the MDL, while Responding Defendants and OneWest argue that these claims have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court.

Each of these claims contains the allegation that defendants failed to disclose their “predatory, unethical and unsound lending and foreclosure practices” and the “predatory… practices of other major lenders, of which Defendants were aware per the MERS system.”^[6] Thus, these claims involve both MERS-related omissions and non-MERS-related omissions which could serve as the basis for a finding of fraud. However, just as with the fraud in the inducement claims above, the fraud through omission claims cannot be severed. Therefore, these claims have been transferred in their entirety to the MDL.

C. Racketeering

Plaintiffs assert claims for racketeering activity under Nevada law in Duncan (Eleventh Claim), Sieben (Eleventh Claim), and Huck (Eleventh Claim). These claims allege vaguely that defendants have “engaged in racketeering” via the “predatory and abusive lending practices described herein.”^[7] Responding Defendants argue that because these alleged underlying lending practices have been bifurcated, with some retained and some remanded, this racketeering claim must also have been split. Moving Defendants argue that because these claims are unclear as to which practices actually constitute the racketeering claim, they have been transferred to the MDL in its entirety.

The Court finds that these claims incorporate each and every other claim in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a racketeering claim or a pair of MERS-related violations to support a racketeering claim. Therefore, these racketeering claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[8]

D. Civil Conspiracy

Plaintiffs assert claims for civil conspiracy in, Duncan (Tenth Claim), Sieben (Tenth Claim), and Huck (Tenth Claim). These claims allege vaguely that defendants have “entered into a conspiracy with other members of MERS” in which they “failed to inform Nevada mortgagors of their rights,” continue to illegally “eject Nevadans” from their homes, and commit the violations alleged in the other claims of the complaint.^[9] Responding Defendants argue that because these alleged underlying violations include claims that have been retained and claims that have been remanded, this conspiracy claim must also have been split. Moving Defendants argue that all of the allegations are fused with the alleged MERS conspiracy and have thus been transferred to the MDL.

The Court finds that these claims are cumulative of all other claims in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a conspiracy claim or a pair of MERS-related violations to support a conspiracy claim. Therefore, these civil conspiracy claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[10]

E. Contractual Breach of Duty of Good Faith and Fair Dealing and Tortious Breach of the Implied Duty of Good Faith and Fair Dealing

The parties disagree on these two types of claims in Duncan (Eighth and Ninth Claims), Sieben (Eighth and Ninth Claims), Huck (Eighth and Ninth Claims), and Ellifritz (Eighth and Ninth Claims). Moving Defendants argue that these claims have been transferred in full, Responding Defendants argue that these claims in Duncan, Sieben, and Huck have been severed with part transferred and part remanded, and OneWest argues that these claims in Ellifritz have been remanded in full.

Plaintiffs allege that defendants’ participation in MERS created a duty of good faith and fair dealing which was breached in the loan origination process.^[11] Thus, even though these claims involve loan origination, they raise questions of fact sufficiently related to operation of MERS. Thus, these claims have been transferred in their entirety to the MDL.

F. Wrongful Foreclosure

Plaintiffs assert a claim for wrongful foreclosure in Ellifritz (Fifth Claim). Moving Defendants argue that the claim has been retained, while OneWest argues that this claim has been split. Specifically, OneWest argues that “Plaintiffs’ allegation that their obligations have been discharged because investors of mortgage-backed securities received federal bailout funds” deals with “collection of payments on the mortgage loan, and whether Plaintiffs’ payment obligation has been discharged” and has been remanded. (Doc. #420 at 5-6.) Moving Defendants contend that because “the federal-bailout allegation concerns the role of [MERS], the `wrongful foreclosure’ claim was transferred to this Court in its entirety.” (Doc. #433 at 6.)

The Panel’s transfer order made clear that the actions transferred to this Court “possess a common factual core regarding allegations that… security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party.” (Doc. #1 at 2.) Here the allegation is that defendants’ “foreclosures are inappropriate” due to the workings of the federal bailout. This allegation appears to share sufficient questions of fact with claims regarding the formation and operation of MERS that it is properly part of the MDL. Accordingly, the entirety of this claim for wrongful foreclosure has been retained.

G. Conspiracy to Commit Fraud and Conversion

Plaintiffs assert a claim for “conspiracy to commit fraud and conversion” in Ellifritz (Second Claim). Moving Defendants argue that this claim has been transferred to the MDL and OneWest argues that this claim has been remanded. The claim alleges that defendants conspired to defraud plaintiffs “by participating in [MERS]… which was the forming of an association to conspire to deprive Plaintiff(s) of their property through fraud and misrepresentation…”^[12] This allegation relates to the formation and operation of MERS and, thus, the Court finds that this claim has been transferred.

Accordingly,

IT IS ORDERED that the Motion to Remand Certain Claims (Doc. #364) is GRANTED IN PART and DENIED IN PART.

IT IS FURTHER ORDERED that with respect to Huck (CV 10-401-PHX-JAT), Gillespie (CV 10-413-PHX-JAT), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow) the motion is denied without prejudice. Moving Defendants shall have ten days after the Court rules on the motions for leave to amend to file a motion to remand all claims that it asserts the panel remanded to the respective transferor courts in the transfer orders; Plaintiffs and the non-moving Defendants shall respond to this motion to remand within ten days and in the responses shall specify what claims they agree were remanded, what additional claims, if any, have been remanded, and what claims, if any, they assert were not remanded; Moving Defendants shall reply (in a consolidated reply) within ten days.

IT IS FURTHER ORDERED that with respect to Duncan (CV 10-414-PHX-JAT), Sieben (CV 10-416-PHX-JAT), Huck (CV 10-417-PHX-JAT), Vo (CV 10-425-PHX-JAT), Ellifritz (CV 10-427-PHX-JAT), McConathy (CV 10-428-PHX-JAT), Smith (CV 10-429-PHX-JAT), and Sage (CV 10-456-PHX-JAT) claims 2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and claim 1 and part of claims 3, 4, 10, 11, and 12 have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Eastwood (CV 10-426-PHX-JAT) claims 1-2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, 10, 11, and 12 have been remanded to the transferor court. MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Mason (CV 10-457-PHX-JAT) and Fitzgerald (CV 10-460-PHX-JAT) claims 1-4 and part of claim 6 (i.e., injunctive relief, declaratory relief, and quiet title) remain with the undersigned as part of the MDL and claim 5 and part of claim 6 (i.e., injunctive relief, declaratory relief, and reformation) have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Freeto (CV 10-459-PHX-JAT) claims 2, 5-11, and 13 and part of claims 3 and 4 remain with the undersigned as part of the MDL and claims 1 and 12 and part of claims 3 and 4 have been remanded to the transferor court.^[13] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Dominguez (CV 10-461-PHX-JAT) claims 1-2, 5-11, 13 and 14 and part of claims 3, 4, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, and 12 have been remanded to the transferor court.^[14] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this Order in each member case listed on page 2.

IT IS FURTHER ORDERED that with respect to any claims that are staying with this Court, Defendants shall answer or otherwise respond to those claims within the time limits set in the Initial Practice and Procedure Order (Doc. #25); with respect to any claims that have been remanded to the transferor courts, Defendants shall answer or otherwise respond to those claims within fifteen days of this Order, unless any order of the transferor court is inconsistent with this Order, in which case, the order of the transferor court shall control.

IT IS FURTHER ORDERED within 12 days of this Order, MERS shall file all documents related to a case bifurcated herein into the record of the transferor court in that particular case. (Because this Court will not transfer the entire MDL file and docket to any individual transferor court, this will insure the Judge in the transferor court has a complete record for that specific case).

[1] The parties have fully briefed this issue pursuant to the Court’s Order on Practices and Procedures (Doc. #176). Although the parties sought “remand” of certain claims to the transferor court, under Section 1407(a), remands to a transferor court can only be effected by the Judicial Panel on Multidistrict Litigation. 28 U.S.C. § 1407; see also R.P.J.P.M.L. 7.6. The Court, thus, stresses that this order is solely a determination of which claims are pending before this Court and which claims remain in their respective transferor courts, pursuant to the Panel’s transfer orders.

[2] Twenty-one additional cases transferred by the transfer order have been addressed by a separate set of briefing.

[3] In four cases briefed for this order, CV 10-401-PHX-JAT (Huck), CV 10-413-PHX-JAT (Gillespie), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow), Plaintiffs have moved for leave to file amended complaints. (Doc. ##525, 526, 564, 573.) The Court will wait until after it grants or denies those motions to determine which claims have been retained and which claims have been remanded in these four cases. An updated briefing schedule is set forth below.

[4] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 48-50

[5] Id.

[6] See, e.g., CV 10-413-PHX-JAT (Duncan), Doc. #1-1 at 31.

[7] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 43.

[8] The identical racketeering claims in Vo (Tenth Claim), Eastwood (Tenth Claim), Ellifritz (Tenth Claim), McConathy (Tenth Claim), Smith (Tenth Claim), Sage (Tenth Claim), Freeto (Tenth Claim), and Dominguez (Tenth Claim) are also bifurcated.

[9] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 41-42.

[10] The identical civil conspiracy claims in Vo (Eleventh Claim), Eastwood (Eleventh Claim), Ellifritz (Eleventh Claim), McConathy (Eleventh Claim), Smith (Eleventh Claim), Sage (Eleventh Claim), Freeto (Eleventh Claim), and Dominguez (Eleventh Claim) are also bifurcated.

[11] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 38-41.

[12] CV 10-437-PHX-JAT (Ellifritz), Doc. #1-1 at 41.

[13] While these remanded claims do not appear to involve Defendants Litton Loan Servicing LP, Bank of New York Mellon as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4, and JPMorgan Chase Bank, National Association, as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4 (collectively, “Litton Loan Group”), this argument is better made in a motion to dismiss. Thus, the Court remands these claims even as they relate to the Litton Loan Group.

[14] The Court remands these claims even as they relate to Defendant Litton Loan Servicing LP.

IN RE Mortgage Electronic Registration Systems (MERS) Litigation.

No. 09-2119-JAT.

United States District Court, D. Arizona.

June 4, 2010.

ORDER

JAMES A. TEILBORG, District Judge.

In the transfer order establishing this consolidated multidistrict litigation (“MDL”), the Judicial Panel on Multidistrict Litigation (“Panel”) stated, “IT IS FURTHER ORDERED that claims unrelated to the formation and/or operation of the MERS system are simultaneously remanded to their respective transferor courts.” (Doc. #1.) The parties contest which claims in each of the various cases relate to the formation and/or operation of MERS.^[1] This Order addresses the thirteen cases^[2] listed below that were transferred by the MDL Conditional Transfer Order (CTO-2) and Simultaneous Separation and Remand of Certain Claims (Doc. #107):

First Plaintiff's Name   Arizona Case Number   Original Jurisdiction Case Number

Huck[3]               CV 10-401-PHX-JAT     3:09-553 (Nevada)
Gillespie                CV 10-413-PHX-JAT     3:09-556 (Nevada)
Duncan                   CV 10-414-PHX-JAT     3:09-632 (Nevada)
Sieben                   CV 10-416-PHX-JAT     3:09-642 (Nevada)
Huck                     CV 10-417-PHX-JAT     3:09-643 (Nevada)
Vo                       CV 10-425-PHX-JAT     3:09-654 (Nevada)
Eastwood                 CV 10-426-PHX-JAT     3:09-656 (Nevada)
Ellifritz                CV 10-427-PHX-JAT     3:09-663 (Nevada)
McConathy                CV 10-428-PHX-JAT     3:09-665 (Nevada)
Smith                    CV 10-429-PHX-JAT     3:09-666 (Nevada)
Sage                     CV 10-456-PHX-JAT     3:09-689 (Nevada)
Mason                    CV 10-457-PHX-JAT     3:09-734 (Nevada)
Freeto                   CV 10-459-PHX-JAT     3:09-754 (Nevada)
Fitzgerald               CV 10-460-PHX-JAT     3:10-1 (Nevada)
Dominguez                CV 10-461-PHX-JAT     3:10-16 (Nevada)

I. General Interpretation of the Transfer Order

In the initial transfer order, the Panel transferred to this Court all allegations within these actions that “the various participants in MERS formed a conspiracy to commit fraud and/or that security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party” or that otherwise concern the “formation and operation” of MERS. (Doc. #1.) However, the Panel simultaneously remanded unrelated claims to their transferor courts, finding that “plaintiffs’ claims relating to loan origination and collection practices do not share sufficient questions of fact with claims regarding the formation and operation” of MERS and their inclusion “would needlessly entangle the litigation in unrelated, fact-intensive issues.” Id.

Accordingly, this Court will not retain claims that, although naming MERS as a defendant, allege conduct primarily related to loan origination and collection practices, or otherwise stray from the common factual core of the MDL. Only causes of action that in essence turn on the formation or operation of MERS, no matter how framed, have been transferred to the undersigned.

Defendants Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc. (collectively, “Moving Defendants”) filed a Motion to Remand Claims. (Doc. #364.) Four responses were filed. Defendant OneWest Bank (“OneWest”) disagrees with Moving Defendants on six claims in one case. (Doc. #420.) Defendants Countrywide Home Loans, Inc., Countrywide Financial Corp., Countrywide Bank, F.S.B., Bank of America Corporation, N.A., ReconTrust Company, N.A., First Horizon Home Loans Corporation, and Wells Fargo Bank (collectively, “Responding Defendants”) disagree as to six types of claims in seven cases. (Doc. #428.) Two other responses were filed that do not dispute the Moving Defendants’ analysis. (Doc. ##415, 416.) MERS replied. (Doc. #433.)

II. Claims on Which the Parties Do Not Agree

Within these “tag-along” actions there are several types of claims over which the parties disagree. Where the parties agree as to the proper determination of a claim, the Court adopts the parties’ determination unless otherwise noted.

A. Fraud in the Inducement

The parties disagree about the status of claims for fraud in the inducement in Duncan (Fourteenth Claim), Sieben (Fourteenth Claim), Huck (Fourteenth Claim), and Ellifritz (Fourteenth Claim). Moving Defendants argue that all of these claims have been transferred to the MDL. Responding Defendants argue that the claims in Duncan, Sieben, and Huck have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court. OneWest argues that the claim in Ellifritz has been remanded in its entirety.

Each of these claims contains the allegation that defendants “failed to disclose the material terms of the loans” and other allegations relating to the loan origination process.^[4] But these claims also allege that defendants failed to disclose that they “had no lawful right to foreclose upon” the properties and that “[the plaintiffs'] obligations on the notes had been discharged.” These allegations relate to the operation of MERS.^[5]

While either the MERS-related misrepresentations or the non-MERS-related misrepresentations could each be logically sufficient to establish liability, it may be that only all of the misrepresentations together were sufficient to induce the plaintiffs to enter the contract. Thus, these claims cannot be split and—as at least some of the allegations relate to the operation and formation of MERS—these claims have been transferred in their entirety to the MDL.

B. Fraud Through Omission

The Parties disagree about the status of claims for fraud through omission in Duncan (Sixth Claim), Sieben (Sixth Claim), Huck (Sixth Claim), and Ellifritz (Sixth Claim). Moving Defendants argue that these claims have been transferred to the MDL, while Responding Defendants and OneWest argue that these claims have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court.

Each of these claims contains the allegation that defendants failed to disclose their “predatory, unethical and unsound lending and foreclosure practices” and the “predatory… practices of other major lenders, of which Defendants were aware per the MERS system.”^[6] Thus, these claims involve both MERS-related omissions and non-MERS-related omissions which could serve as the basis for a finding of fraud. However, just as with the fraud in the inducement claims above, the fraud through omission claims cannot be severed. Therefore, these claims have been transferred in their entirety to the MDL.

C. Racketeering

Plaintiffs assert claims for racketeering activity under Nevada law in Duncan (Eleventh Claim), Sieben (Eleventh Claim), and Huck (Eleventh Claim). These claims allege vaguely that defendants have “engaged in racketeering” via the “predatory and abusive lending practices described herein.”^[7] Responding Defendants argue that because these alleged underlying lending practices have been bifurcated, with some retained and some remanded, this racketeering claim must also have been split. Moving Defendants argue that because these claims are unclear as to which practices actually constitute the racketeering claim, they have been transferred to the MDL in its entirety.

The Court finds that these claims incorporate each and every other claim in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a racketeering claim or a pair of MERS-related violations to support a racketeering claim. Therefore, these racketeering claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[8]

D. Civil Conspiracy

Plaintiffs assert claims for civil conspiracy in, Duncan (Tenth Claim), Sieben (Tenth Claim), and Huck (Tenth Claim). These claims allege vaguely that defendants have “entered into a conspiracy with other members of MERS” in which they “failed to inform Nevada mortgagors of their rights,” continue to illegally “eject Nevadans” from their homes, and commit the violations alleged in the other claims of the complaint.^[9] Responding Defendants argue that because these alleged underlying violations include claims that have been retained and claims that have been remanded, this conspiracy claim must also have been split. Moving Defendants argue that all of the allegations are fused with the alleged MERS conspiracy and have thus been transferred to the MDL.

The Court finds that these claims are cumulative of all other claims in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a conspiracy claim or a pair of MERS-related violations to support a conspiracy claim. Therefore, these civil conspiracy claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[10]

E. Contractual Breach of Duty of Good Faith and Fair Dealing and Tortious Breach of the Implied Duty of Good Faith and Fair Dealing

The parties disagree on these two types of claims in Duncan (Eighth and Ninth Claims), Sieben (Eighth and Ninth Claims), Huck (Eighth and Ninth Claims), and Ellifritz (Eighth and Ninth Claims). Moving Defendants argue that these claims have been transferred in full, Responding Defendants argue that these claims in Duncan, Sieben, and Huck have been severed with part transferred and part remanded, and OneWest argues that these claims in Ellifritz have been remanded in full.

Plaintiffs allege that defendants’ participation in MERS created a duty of good faith and fair dealing which was breached in the loan origination process.^[11] Thus, even though these claims involve loan origination, they raise questions of fact sufficiently related to operation of MERS. Thus, these claims have been transferred in their entirety to the MDL.

F. Wrongful Foreclosure

Plaintiffs assert a claim for wrongful foreclosure in Ellifritz (Fifth Claim). Moving Defendants argue that the claim has been retained, while OneWest argues that this claim has been split. Specifically, OneWest argues that “Plaintiffs’ allegation that their obligations have been discharged because investors of mortgage-backed securities received federal bailout funds” deals with “collection of payments on the mortgage loan, and whether Plaintiffs’ payment obligation has been discharged” and has been remanded. (Doc. #420 at 5-6.) Moving Defendants contend that because “the federal-bailout allegation concerns the role of [MERS], the `wrongful foreclosure’ claim was transferred to this Court in its entirety.” (Doc. #433 at 6.)

The Panel’s transfer order made clear that the actions transferred to this Court “possess a common factual core regarding allegations that… security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party.” (Doc. #1 at 2.) Here the allegation is that defendants’ “foreclosures are inappropriate” due to the workings of the federal bailout. This allegation appears to share sufficient questions of fact with claims regarding the formation and operation of MERS that it is properly part of the MDL. Accordingly, the entirety of this claim for wrongful foreclosure has been retained.

G. Conspiracy to Commit Fraud and Conversion

Plaintiffs assert a claim for “conspiracy to commit fraud and conversion” in Ellifritz (Second Claim). Moving Defendants argue that this claim has been transferred to the MDL and OneWest argues that this claim has been remanded. The claim alleges that defendants conspired to defraud plaintiffs “by participating in [MERS]… which was the forming of an association to conspire to deprive Plaintiff(s) of their property through fraud and misrepresentation…”^[12] This allegation relates to the formation and operation of MERS and, thus, the Court finds that this claim has been transferred.

Accordingly,

IT IS ORDERED that the Motion to Remand Certain Claims (Doc. #364) is GRANTED IN PART and DENIED IN PART.

IT IS FURTHER ORDERED that with respect to Huck (CV 10-401-PHX-JAT), Gillespie (CV 10-413-PHX-JAT), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow) the motion is denied without prejudice. Moving Defendants shall have ten days after the Court rules on the motions for leave to amend to file a motion to remand all claims that it asserts the panel remanded to the respective transferor courts in the transfer orders; Plaintiffs and the non-moving Defendants shall respond to this motion to remand within ten days and in the responses shall specify what claims they agree were remanded, what additional claims, if any, have been remanded, and what claims, if any, they assert were not remanded; Moving Defendants shall reply (in a consolidated reply) within ten days.

IT IS FURTHER ORDERED that with respect to Duncan (CV 10-414-PHX-JAT), Sieben (CV 10-416-PHX-JAT), Huck (CV 10-417-PHX-JAT), Vo (CV 10-425-PHX-JAT), Ellifritz (CV 10-427-PHX-JAT), McConathy (CV 10-428-PHX-JAT), Smith (CV 10-429-PHX-JAT), and Sage (CV 10-456-PHX-JAT) claims 2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and claim 1 and part of claims 3, 4, 10, 11, and 12 have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Eastwood (CV 10-426-PHX-JAT) claims 1-2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, 10, 11, and 12 have been remanded to the transferor court. MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Mason (CV 10-457-PHX-JAT) and Fitzgerald (CV 10-460-PHX-JAT) claims 1-4 and part of claim 6 (i.e., injunctive relief, declaratory relief, and quiet title) remain with the undersigned as part of the MDL and claim 5 and part of claim 6 (i.e., injunctive relief, declaratory relief, and reformation) have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Freeto (CV 10-459-PHX-JAT) claims 2, 5-11, and 13 and part of claims 3 and 4 remain with the undersigned as part of the MDL and claims 1 and 12 and part of claims 3 and 4 have been remanded to the transferor court.^[13] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Dominguez (CV 10-461-PHX-JAT) claims 1-2, 5-11, 13 and 14 and part of claims 3, 4, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, and 12 have been remanded to the transferor court.^[14] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this Order in each member case listed on page 2.

IT IS FURTHER ORDERED that with respect to any claims that are staying with this Court, Defendants shall answer or otherwise respond to those claims within the time limits set in the Initial Practice and Procedure Order (Doc. #25); with respect to any claims that have been remanded to the transferor courts, Defendants shall answer or otherwise respond to those claims within fifteen days of this Order, unless any order of the transferor court is inconsistent with this Order, in which case, the order of the transferor court shall control.

IT IS FURTHER ORDERED within 12 days of this Order, MERS shall file all documents related to a case bifurcated herein into the record of the transferor court in that particular case. (Because this Court will not transfer the entire MDL file and docket to any individual transferor court, this will insure the Judge in the transferor court has a complete record for that specific case).

[1] The parties have fully briefed this issue pursuant to the Court’s Order on Practices and Procedures (Doc. #176). Although the parties sought “remand” of certain claims to the transferor court, under Section 1407(a), remands to a transferor court can only be effected by the Judicial Panel on Multidistrict Litigation. 28 U.S.C. § 1407; see also R.P.J.P.M.L. 7.6. The Court, thus, stresses that this order is solely a determination of which claims are pending before this Court and which claims remain in their respective transferor courts, pursuant to the Panel’s transfer orders.

[2] Twenty-one additional cases transferred by the transfer order have been addressed by a separate set of briefing.

[3] In four cases briefed for this order, CV 10-401-PHX-JAT (Huck), CV 10-413-PHX-JAT (Gillespie), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow), Plaintiffs have moved for leave to file amended complaints. (Doc. ##525, 526, 564, 573.) The Court will wait until after it grants or denies those motions to determine which claims have been retained and which claims have been remanded in these four cases. An updated briefing schedule is set forth below.

[4] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 48-50

[5] Id.

[6] See, e.g., CV 10-413-PHX-JAT (Duncan), Doc. #1-1 at 31.

[7] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 43.

[8] The identical racketeering claims in Vo (Tenth Claim), Eastwood (Tenth Claim), Ellifritz (Tenth Claim), McConathy (Tenth Claim), Smith (Tenth Claim), Sage (Tenth Claim), Freeto (Tenth Claim), and Dominguez (Tenth Claim) are also bifurcated.

[9] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 41-42.

[10] The identical civil conspiracy claims in Vo (Eleventh Claim), Eastwood (Eleventh Claim), Ellifritz (Eleventh Claim), McConathy (Eleventh Claim), Smith (Eleventh Claim), Sage (Eleventh Claim), Freeto (Eleventh Claim), and Dominguez (Eleventh Claim) are also bifurcated.

[11] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 38-41.

[12] CV 10-437-PHX-JAT (Ellifritz), Doc. #1-1 at 41.

[13] While these remanded claims do not appear to involve Defendants Litton Loan Servicing LP, Bank of New York Mellon as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4, and JPMorgan Chase Bank, National Association, as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4 (collectively, “Litton Loan Group”), this argument is better made in a motion to dismiss. Thus, the Court remands these claims even as they relate to the Litton Loan Group.

[14] The Court remands these claims even as they relate to Defendant Litton Loan Servicing LP.